(Reuters) - A divided U.S. federal appeals court rejected Electronic Arts Inc's (EA.O) effort to throw out a lawsuit by former collegiate athletes who accused the company of using their images in video games without permission.
By a 2-1 vote, the 9th U.S. Circuit Court of Appeals said EA's use of the athletes' likenesses in its NCAA Football and NCAA Basketball games did not deserve protection as free expression under the First Amendment of the U.S. Constitution.
Samuel Keller, the former Arizona State University quarterback, and eight other plaintiffs had claimed that EA used their identities and likenesses without compensation.
The decision upheld a ruling by U.S. District Judge Claudia Wilken in Oakland, California and sets the stage for Keller to seek class-action status on behalf of other athletes.
"It says that athletes do have a right of ownership in their images, even after they leave college," said Robert Boland, a sports law professor at New York University's Tisch Center. "While it doesn't change the status of athletes now in college, it begins to shape their financial rights in their images."
EA plans to appeal.
Wilken also oversees a four-year-old antitrust lawsuit led by former UCLA basketball star Ed O'Bannon, among the plaintiffs in the Keller case, over whether athletes should share in profit from the National Collegiate Athletic Association's broader use of their names and likenesses.
Billions of dollars may be at stake in that case.
In a separate decision on Wednesday, using a different legal test, the same 9th Circuit panel unanimously upheld another judge's dismissal of National Football League Hall of Famer Jim Brown's trademark case against EA over the use of his likeness in its Madden NFL video game.
Writing for the Keller majority, Circuit Judge Jay Bybee said EA's games lacked "significant transformative elements" to defeat the athletes' right-of-publicity claims, and that NCAA Football "literally recreates Keller in the very setting in which he has achieved renown."
The judge noted that in the 2005 edition, Arizona State's virtual starting quarterback shared Keller's height, weight, facial features, hair color and style, home state, playing style, school year, skin tone, throwing arm, uniform number and visor preference.
He said the case recalled No Doubt's successful 2011 court challenge against Activision Blizzard Inc's (ATVI.O) use of its likeness in its "Band Hero" video game, whose expressive elements were "manifestly subordinated" to a desire to "commercially exploit" the pop group's fame.
Circuit Judge Sidney Thomas dissented, saying the majority view threatens all realistic depictions of actual people, even if those depictions are incidental.
"This logic jeopardizes the creative use of historic figures in motion pictures, books, and sound recordings," he wrote. "Absent the use of actual footage, the motion picture 'Forrest Gump' might as well be just a box of chocolates."
In the Brown case, Bybee concluded that the likeness of the former Cleveland Browns running back was "artistically relevant" to Madden NFL, and that Brown did not show that EA explicitly misled consumers about his involvement in the game.
"As expressive works, the Madden NFL video games are entitled to the same First Amendment protection as great literature, plays, or books," Bybee wrote.
The 9th Circuit took more than a year to decide both cases. The Keller decision echoed a May 21 ruling by a federal appeals court in Philadelphia that revived a similar lawsuit against EA by former Rutgers University quarterback Ryan Hart. EA is based in Redwood City, California.
"We're pleased with the outcome regarding Jim Brown's likeness, but equally disappointed with the ruling against First Amendment protection in the Keller case," EA spokesman John Reseburg said. "We believe the reasoning in Judge Thomas' dissent in that decision will ultimately prevail as we seek further court review."
Steve Berman, a lawyer for Keller, in an email said he is "pleased with the win" in his case and will pursue class certification. "No reasonable person can dispute they use the players' likeness (and) doing so violates the law," he said.
Ronald Katz, a lawyer for Brown, had no immediate comment on the decision against his client.
The O'Bannon antitrust lawsuit seeks to force the NCAA to give athletes a cut of its profits from broadcasts, memorabilia sales and other business activities featuring them.
Wilken in June heard oral arguments on whether to certify a class of thousands of athletes. She has yet to rule.
The NCAA did not immediately respond on Wednesday to a request for comment.
On July 17, the NCAA said it will not renew a contract that expires next June to license its name and logo for EA's college football game. EA stopped producing NCAA Basketball in 2010.
In afternoon trading, EA shares were up 0.3 percent at $26.16.
The cases are In re: NCAA Student-Athlete Name & Likeness Licensing Litigation, 9th U.S. Circuit Court of Appeals, No. 10-15387; and Brown v. Electronic Arts Inc in the same court, No. 09-56675.
Reporting by Jonathan Stempel in New York; editing by Andrew Hay and Kenneth Barry